According to German law, the spouses whose matrimonial property regime is not defined by their own choice usually fall under the statutory matrimonial property regime called “Zugewinngemeinschaft,” often translated as “community of accrued gains.” This implies that once the spouses get married, they do not have any joint property. In fact, every spouse keeps ownership of their property, with equalization of accrued gains coming into play only later when parties go through divorce proceedings. Thus, it is important to document assets before the marriage and check if the standard German system suits couples’ needs at all.
International couples face extra challenges when addressing laws regarding matrimonial property. Different nationalities, where the couple lives, where the wedding takes place, and real estate owned in foreign countries may all play a role in determining which jurisdictions’ laws govern the couple’s case. Just because a pair gets married in a certain jurisdiction does not mean that its laws automatically cover the consequences of the marriage. This is why couples in Germany need to work on their finance planning with professionals that specialize in family law in Germany and abroad.
Financial Clarity Before Marriage
Preparing financially for weddings goes further than just opening a joint bank account or deciding who pays bills. The best way to tackle this issue is by assessing the entire financial situation of both partners, including all of their assets and debts, revenues, retirement plans, future investments, and possible changes in financial situations due to having kids, taking leaves from work, etc.
An extensive overview may consist of the following items:
- Bank accounts, wrap accounts, stock shares, investment funds, and similar investments
- Real estate properties in Germany and any other country
- Shares of companies, partnerships, business interests, and business assets
- Any existing debts
- Gifts or inheritances expected in the future
- Retirement pensions (some may be paid by the employer)
- Difference in salaries and possible family leave in the future
- Joint investment and purchases of real estate planned
- Properties owned in different currencies, digital currency, or virtual currencies
- Country of citizenship and country of residence, and the possibility of moving abroad.
The comprehensive overview can be of tremendous help in the process of everyday planning, as well as in drafting a prenuptial agreement. In addition, it can be considered an excellent basis indicating the financial position of the parties at the start of the marriage. Bank statements, investment records, property records, incorporation documents, outstanding loans, and proper valuations will be of great help rather than relying on memories many years later.
Statutory Marital Property Regime of Community of Accrued Gains
According to Germany’s law on marriage property arrangements, couples who have not entered into a valid arrangement falling outside the law must operate under a regime referred to as “the community of accrued gains” or Zuewinnungsgemeinschaft. “One common misbelief is that the marriage automatically converts all privately owned goods into marital property.”
That is not quite the reality. In fact, it is generally the case that each spouse retains ownership of his or her property. In fact, property acquired by one spouse individually during the marriage can never be automatically transferred to the common property of both spouses, except for the fact that the two spouses are married.
For instance, an individual who possessed a property prior to their marriage does not necessarily give up their exclusive possession when entering into a marriage. The case is similar in regard to the investment portfolio that is already owned by one spouse. Nonetheless, the increase in value of certain property can be essential at the moment of determining the accrued gains. Therefore, if some property is going to increase significantly in value, it is necessary to think about whether the couple’s intentions suit this legal regime.
Having separate bank accounts does not automatically create the German legal system of separation of property either. Whether spouses make use of one common account or several separate accounts is simply a matter of financial practice and has nothing to do with the matrimonial property regime since it is determined by the German law.
This distinction is important for English-speaking couples who have heard of terms such as “marital property state” or “separate property.” Concepts that exist in US law differ from those that exist in German law; therefore, one must learn how to understand the difference between rights of ownership in law and the process of equalization of property gains when it comes to protecting assets in a marriage in Germany.
Prenuptial Agreement as a Tool for Clear Asset Rules
According to the law, prenuptial agreements in Germany are called Eheverträge; such contracts allow couples to customize their matrimonial property issues. The term “prenuptial” implies that an Ehevertrag should exist only before the wedding; however, German law permits the contract to be signed before the wedding as well.
A prenup can cover, depending on the circumstances of the couple, the marital property regime and the regime of accrued gains equalization; property separation or a modified community of accrued gains; specific real estate or business interests; differentiating business and private assets; increases in the value of assets; equalization measures related to pensions; and maintenance provisions, according to German law and regulations. An international couple may also include foreign assets in their prenup and apply an appropriate law to the agreement.
A premarital agreement should not be treated as a “one-size-fits-all” document. The terms should represent the way in which the couple will actually live. Counterarguments related to having children, taking a parental leave, having career breaks, self-employment, having dramatically different wealth levels, owning a business, having real estate, future inheritance, and having connections to other states should be considered when drafting a prenup.
German law also imposes legal formalities in regard to marriages. An Ehevertrag must be notarized, meaning that if the spouses sign a document among themselves, it will not satisfy the legal requirements. Therefore, if the finances are complicated or there is an international aspect, the parties may want to think things through before getting the agreement notarized.
Separation of Property and Modified Community of Accrued Gains
Gütertrennung means separation of property and is a property regime of married couples. Upon opting for it, the couple is not bound by the statutory regime of equal shares of property accumulated during marriage. Rather, each spouse owns his or her own property and assets according to the specific regulations of Gütertrennung.
Yet, the complete separation of property option is not always the solution for all wealthy couples, entrepreneurs, or people in international marriages. The decision on matrimonial property also influences inheritance planning, tax issues, retirement arrangements, and family law issues in a broad sense. Therefore, the issue should be looked at not only from the post-divorce standpoint but also from the standpoint of what to do if one of the spouses dies or spends many years being less productive due to family duties.
A popular alternative is the modified community of accrued gains (modifizierte Zugewinngemeinschaft). This type of property system still operates with the statutory system being in force, though some positions might be agreed upon. For instance, business property, shares of a company, certain properties, or property belonging to the family can be treated differently in certain situations.
Assets Before Marriage and Clear Documentation
The property and investments obtained prior to marriage should be properly documented. This is especially true when one of the partners has significant investment portfolios, property, stock in companies, private debts, precious collections, digital assets, or shares in a family business.
The asset schedule properly prepared can show who owns what important property, its value at the proper time, and papers documenting this value. As for land, information from the land register and reliable estimates may be of great help. As for businesses, the percentage of ownership, agreements among partners, financial documents, and economic value of ownership may be important. The investment accounts should also be recorded in a way that shows their value easily.
Debts are equally important, like assets. The financial status at the start of the marriage property regime is not based purely upon things that a person already has; debts are also part of the calculation. It is very important that a person entering the marriage has proper documentation of his possessions, and the same goes for a person getting married with debts like mortgages and loans. Good records may prove very useful in calculating finances many years later.
Inheritance, Gifts, and Real Estate
The issue of inheritance, marital property, gifts, and the German community of accrued gains tends to create a lot of confusion, especially among international couples. English-speaking partners might wonder whether an inheritance received during the time of marriage becomes a part of the marital property or whether it is necessary to split the inherited property at some point.
According to the laws of Germany, there are regulations regarding the cases in which the property acquired through inheritance or specific types of gifts must be treated in a very specific manner for the purpose of calculating the accrued profits. To put it clearly, in the case of an inherited property, it is always included in the assets of the spouse who receives the property instead of being treated as any other property earned through work in the course of marriage.
However, there is a different story when it comes to the future treatment of the inherited property or gifted asset. If the asset appreciates substantially, then the amount of the change in value will be considered in making the accrued gains calculation. Therefore, it cannot be said that an inheritance is completely outside the matrimonial property regime, as the valuation of the asset, future appreciation, and its nature will play a part in the final outcome.
There are more things about real estate that require careful consideration since issues of ownership, financing, rent income, and payments done by spouses are different matters. One spouse can rightfully own the property while the other can help with payments, renovations, or family tasks that are necessary to allow wealth to accrue. In Germany, a well-written prenuptial contract can clarify the handling of certain property relations or financial payments without altering legal ownership.
Foreign real estate creates another level of complexity. While German family law can be applied in the matrimonial property regime, the law of the country where the property is located can also apply to the ownership issues, registration, and other matters connected with property law. Therefore, international couples have to assess their foreign assets on an individual basis, taking into account their location, ownership, financing, and respective countries.
Businesses, Company Interests, and Business Assets
Financial planning is critical for entrepreneurs, freelancers, solo practitioners, and investors before getting married. The value of a business can increase substantially after the wedding, although the majority of this wealth remains working in a business instead of staying in a bank.
The rules of the modified community property can establish how business assets, interests in businesses, or any other business value should be allotted. Each case is unique, and the goal could be to guarantee the soundness of the business and allow both of the spouses to keep their fair share.
All documents for shareholders and all internal agreements of the company must be checked. Some of them can have definite references to a marriage of a shareholder or to marriage agreements, and the specifics of the situation might also matter. For instance, one spouse could be working in the business without earning enough or suppressing his or her career for the sake of family, and this could help the business grow.
Therefore, a solid prenup cannot limit its scope only to the consideration of individually owned property. Property protection when it comes to marriage also requires the consideration of business ownership, parental duties, personal income, investments, and financial future.
Retirement Planning, Pension Equalization, and Family Responsibilities
In the sphere of German family law matters concerning property regime and retirement equalization are viewed separately from each other because the adoption of a property separation does not automatically mean that all consequences of marriage in the context of pension and retirement issues will be ruled out.
Retirement equalization in Germany is generally viewed as a process concerning the pensions and retirement entitlements accumulated during the period considered as relevant for the marriage by law, which means that the couple may make some arrangements concerning this matter, but they will also need to comply with German laws on the matter.
In this case, it becomes especially relevant if one of the spouses is going to start reducing his/her working hours due to the pregnancy, child care and relatives’ care commitments, moving abroad, or some family plans of the couple.
The appropriate prenuptial agreement must comprise more than protection of assets. Before entering into the marriage, a couple must discuss the potential division of work, unpaid family duties, retirement planning, and the effect of career abandonment throughout their marriage.
International Marriage, Choice of Law, and Foreign Assets
An international prenuptial agreement cannot simply involve the translation of a German prenup into English. The first step is to determine the countries that have a proper legal connection to the couple and the laws that are going to be applicable to the marriage property in question.
The connections can include issues such as the countries of nationality of the couple, the current and previous places of residence of the couple, where the wedding plans to take place, any future plans to move abroad, and bank or investment accounts opened by the couple in different countries.
As far as international marriages involving EU member states are concerned, it should be supposed that the Council Regulation (EU) 2016/1103 is crucial for such marriages, as it has established the rules on jurisdiction, applicable law to marriages, and conclusions involving marriages and property regimes.
According to the regulation, spouses or future spouses have the option, under certain circumstances, of choosing the law of a country where either spouse has their habitual residence at the time the agreement is made or the law of a country of which they have the nationality. It is also important to note that in keeping with the regulation, the law regulating the matrimonial property regime applies to the property subject to such legislation, regardless of where it is located in the world. Its rules on conflict of laws are particularly important for spouses married or who opted for the law governing their matrimonial property regime after January 29, 2019.
In the absence of a valid choice of law, the couples’ first common habitual residence after the marriage plays an important role in the cases governed by the EU regulation. In addition, the nationality of the spouses, as well as the country with which both spouses are closely connected in some cases, can matter, and it makes it important for international couples to think about the question of law and habitual residence even before they separate.
The matrimonial property regulation of the European Union is not applicable in all cases. For instance, maintenance and succession issues may be determined by a different legal framework and conflict of law rules. Some other issues that need to be analyzed separately are court jurisdiction, estate planning, real estate registration, and recognition of agreements concluded outside of the EU and some other issues. For that reason, international contracts have to tackle choice of law, formal validity, language, translation, notarization, foreign assets, and recognition in other jurisdictions that are of importance for the couple.
Postnuptial Agreement After Circumstances Change
It should be noted that a marital agreement does not necessarily have to be concluded prior to marriage. In Germany, legislation enables spouses to either change or adjust their matrimonial property regime after they get married. In English-language practice, this phenomenon is usually referred to as “postnuptial agreements.” However, from the legal point of view, it is still considered an Ehevertrag in Germany.
There could be many reasons why a couple may wish to create or amend an agreement later on. Starting a business, acquiring a valuable real estate property, inheriting something significant, having kids, taking a leave of absence, self-employment, or moving abroad could alter one’s financial situation.
An existing agreement may be worth revisiting if the couple’s family or financial situation is radically different from what they had imagined when the agreement was created.
It is particularly important for international couples to frequently review existing agreements. A new habitual abode, a new nationality, the possession of foreign assets, or relocation abroad may change the legal landscape concerning the marriage.
Fair and Sustainable Agreement Design
A good marriage contract should be written in simple, concise language suitable for the couple’s particular situation. It would be incorrect to take advantage of one of the spouses since the contract might not represent the truth about the couple’s intentions to manage their property and family affairs anymore.
Preparation should include not only the assessment of existing assets but also potential developments in order to find the most realistic variant of the situation. Children, caring for children or elderly parents, long business trips, being self-employed, growing or selling your business, buying real estate properties, or a retirement plan could influence the financial picture in the future.
Both partners should know how the marital contract would be interpreted from the economic point of view and not only from the legal one. In case there are significant differences in wealth, complex business schemes, large foreign assets, or trans-border legal issues, an in-depth analysis of the interests of the parties at issue would guarantee a more efficient approach.
Despite the differences in defining marital agreements, in Germany all requirements of the law must be followed. In Germany all contracts must be notarized in accordance with the requirements of family law.
Financial Planning for International Couples in Germany
Vera Zambrano & Associates provides guidance on German family law and international family law and assists in matters of family law that have an international element to them. These matters may consist of, but are not limited to, international marriages, international children, changing a place of residence, or ownership of real estate in different countries.
For international couples, we can help with preparing a prenuptial agreement in Germany as well as in the English and Spanish languages. Careful financial planning does not mean comprehensively anticipating all possible future events. Rather, it includes the creation of a more precise legal structure, correct documentation of the interests of spouses, and the creation of a legal environment that reflects their real situation.
People who own real estate, business interests and investments, or any other assets or property abroad should think about getting to understand the relevant property rules and regulations very soon.
In case you’re searching for a family lawyer in Berlin who is proficient in English in order to assist you in a prenuptial agreement with international aspects, the evaluation has to take into account German family law as well as international regulations concerning all countries’ connections.
It will be true for those couples that are already married but whose financial situation has become complicated due to various important investments, business affairs, inherited property, real estate, children, or an international move.
The content of this article is for informational purposes only and does not substitute legal advice for any particular case. The legal evaluation of a marriage in an international family will be based on such aspects as various countries, date of marriage, residency, citizenship, agreements made, type and location of the property, and other particular reasons.
FAQ on Prenups, Assets, and Marital Property in Germany
What is Germany’s accrued gains community?
Germany’s accrued gains community (Zugewinngemeinschaft), which is a statutory matrimonial property regime, applies in marriages where parties have not concluded a different matrimonial property regime. It is worth noting that marriage does not mean that both spouses jointly own all properties. An equalization of accrued gains matters only when the statutory regime comes to an end.
When is a prenuptial agreement needed in Germany?
Prenuptial agreements are particularly needed in situations where large differences exist between asset amounts, real estate objects, business interests and expected inheritances, self-employment status, children from previous relationships, and international links. One should find out whether statutory rules of Germany are applicable to the particular couple.
Are properties owned prior to marriage protected in Germany?
Usually, properties owned before marriage belong to the person who owned the property before marriage. Nevertheless, increases in value of properties during marriage may be important for determining accrued gains. Thus, it is important to keep good records of the values of property before marriage.
Will the inheritance be taken as marital property in Germany?
Given its unique treatment under the substantial wealth division in Germany, an inheritance is seen as forming part of the acquiring partner’s wealth at the beginning of the marriage and is unlikely to be categorized as wealth obtained during the marriage. In following years, any increase in the inherited property may, however, count toward the calculation of the total wealth that was accumulated during marriage.
What does "modified community of accrued gains" mean?
"Modified community of accrued gains" implies the combination of different aspects of the German legal system and certain provisions contained in the marital agreement. A great variety of business property and assets may be treated differently under the property regime applied to any specific case.
Is it possible to sign a prenuptial contract after getting married in Germany?
Yes, spouses may sign or amend the Ehevertrag after their marriage. Making an agreement after the marriage is reasonable under various circumstances such as starting a new business, buying property, receiving the inheritance, giving birth to children, or relocating abroad.
Is notarization a major requirement for marital agreement in Germany?
Yes, prenuptial agreements in Germany must be notarized. Signing a private agreement without the required legal form cannot serve the purpose of a marital agreement.
Is a prenuptial agreement recognized outside Germany automatically?
Not all the time. Recognition depends on such factors as the law of another country, the definition of applicable law, formal prerequisites, and the subject of the deal. Before making a marital agreement, international couples must think if there will be any issues with the choice of law, translation, notarization, and recognition.
Are foreign couples allowed to choose German law as a regulation about property rights in case of marriage?
Yes, in some cases they could do so. Under the relevant EU regulation on matrimonial property, spouses are allowed to choose the law of the country related to the usual residence or nationality of one of the spouses. But in each case, it will be necessary to examine the particular situation in order to determine whether German law could be applied.
What do foreign couples have to know about marriage in Germany?
The important aspects include nationality, habitual residence, date of marriage, ownership of real estate and companies abroad, plans connected with changes of residence, existing prenuptial agreements, and applicable legal norms. There are interconnections between matrimonial property law and other legal fields, such as divorce law, alimony law, pension equalization law, and inheritance law, but they should be treated as separate legal fields.